The deals would signal Turkey’s ability to produce vehicles for export after years of being an arms importer. At the same time, a deal with the Saudis would politically cement ties with Turkey against the Iranian-led Shia bloc of countries, sources said.

They said Turkish armored vehicles maker Otokar could sell hundreds of its third-generation tank, the Altay. Meanwhile, rival manufacturer FNSS Defence Systems is close to inking a deal to co-produce medium tanks with an Indonesian partner.

Otokar designed and is producing prototypes of the Altay in a deal to sell four 250-unit batches to the Turkish military. The Turkish Army has 720 German-made Leopard 1 and 2 tanks, 930 American M-60s and 1,370 M-48s, most of which are Cold War-era tanks and need replacement.

One company source confirmed talks with Saudi Arabia but gave no further details. One senior procurement official familiar with Turkish arms exports said Turkey hoped to cut a future deal with Saudi Arabia for the Altay.

“The Altay is not available for immediate sale but is potentially a powerful export product when you think of a medium-term deal. Saudis are good customers with available cash, good political ties and their need for new tanks. We are hopeful about a future deal [for the Altay],” the official said. He added that other countries were interested in buying the Altay but declined to name them.

Saudi Arabia has 320 elderly French AMX-30 tanks in need of replacement. Saudi Arabia and Turkey, along with Qatar, are spearheading efforts to oust Syrian President Bashar al-Assad. The three Muslim countries, with support from the United States and most Western countries, support rebel forces fighting Assad’s Army in a civil war that has taken nearly 100,000 lives in two years.

“Adding a defense industry dimension to their ties would augment the Turkish-Saudi alliance against Iran,” said a Western military attaché here.

But Turkey could face competition. France has proposed replacing Saudi Arabia’s AMX-30s with the AMX-56 Leclerc. The Otokar official said the 65-ton Altay better meets the Saudi requirement than does the 55-ton Leclerc.

“Also, we have almost excellent government-to-government relations with the Saudis,” the official said.

Industry sources said the Altay is similar to Saudi Arabia’s 400 M1 tanks. Both have a 120mm gun, composite armor and high-end electronics.

In 2008, Otokar signed a US $500 million contract with Turkey’s procurement office. Under the deal, Otokar will build four Altay prototypes this year, two years ahead of schedule. The four prototypes will undergo performance tests throughout 2013.

The procurement office selected South Korea’s Hyundai Rotem for technical support. Turkey’s Aselsan is the subcontractor for the fire control system and command, control and communications information system. Also, state-owned MKEK was selected as the subcontractor for the 120mm primary weapon, while Roketsan will provide the armor.

Procurement officials say the serial-production agreement for the Altay would be effective probably in 2017, and together with the expected foreign orders.
Indonesia

In a separate deal, Turkey and Indonesia agreed during the Turkish arms exhibition IDEF’13 this month to jointly develop medium tanks

“Indonesia has chosen Turkey and FNSS because of our internationally acknowledged experience and advanced technology in this field,” one FNSS official said.

He said the co-production project will come into shape in four years. “We are now working to officially submit proposals to jointly design, develop and manufacture the medium tank,” he said.

FNSS has developed technology in a tracked propulsion system while Pindad has technology in wheeled propulsion systems. “Indonesia hopes to learn tracked as well as other technological capabilities with this cooperation,” the procurement official said.